Rising construction costs for Oregon's Portland Public Schools that could impact a bond-funded school improvement plan are a credit negative for the district, according to Moody’s Investors Service.
School officials now say it could cost another $200 million to complete a list of renovation, rebuilding and safety improvement projects promised as part of a $790 million bond approved by voters in 2017, Moody’s analysts said in a report Wednesday.
The report called it “modestly credit negative” for the district which now faces “politically difficult options that include scaling back plans, deferring some projects or returning to voters for additional debt authorization.”
Moody’s analysts said the increased costs follow a nationwide trend for school construction and are partly due to strong demand in the booming Portland area. New tariffs imposed by President Trump on aluminum and steel are also a factor in costs going up, the report stated.
A plus for the district, according to Moody’s analysts, is its low debt burden and growing tax base.
“The district's debt burden is low compared to many of the other 50 largest school districts nationally, which indicates that it has capacity to finance projects with tax-supported bonds amid rising construction costs,” the report stated.
Portland Public Schools issued $349 million in bonds last year and has $441 million in remaining bond authorization that is expected to be issued in 2020, according to Moody’s report. Voters approved a previous $482 million bond for capital projects in 2012.
At an Aug. 14 meeting school board members questioned the rising costs and debated how to address the issue.
“The costs are escalating even as we speak,” School Board Chairwoman Rita Moore said. “This is a difficult market in which to build anything.”
While acknowledging rising construction costs as a factor, some board members have questioned whether the district was overly optimistic in its cost estimates for the bond plan.
District officials have said the bond proceeds would be used to renovate or replace three high schools and a middle school, upgrade fire alarms and sprinkler systems, improve access for those with disabilities and replace leaky, worn or deteriorating roofs.
The district, which operates 79 schools and has about 50,000 students, has facilities with an average age of 77 years and some that are over 100 years old, according to its website.
A citizens bond accountability committee advised the school board at the meeting that the district needs to establish firm budgets for the three high school projects, which have all come in over budget and account for $190 million in increased costs.
School board members came to no decision but said they will continue to examine the high school project budgets.
